17 March 2010

BSE Sensex: 17490

INDIA RESEARCH
Passenger Cars
Automobiles Test Drive

The compact car segment, constituting ~70% of India’s total car sales, is witnessing lot of action. In the last three
months, three new models – Chevrolet Beat, Volkswagen Polo and Ford Figo (all in Rs300,000-500,000 category) –
have been launched in the segment. Two more launches, Nissan Micra and Toyota Etios, are on the anvil over the
next six months. We visited dealerships of these companies to get a first-hand experience of the new launches.
Chevrolet Beat, we believe, is a stylish and attractive proposition from a reputed brand – hence, it should do well in
the domestic market. Ford Figo, with spacious interiors and one of the biggest boot spaces in this category, is clearly
a value-for-money product. Volkswagen Polo comes across as a top-quality German hatchback – competent in terms
of dynamics, good-looking and well-engineered. Though the model has been priced at a premium to Maruti Swift,
we believe customers may not mind paying a little extra for a superior global brand and new look vehicle. Nissan,
given its frugal engineering and high localization, is likely to competitively price its Micra (likely launch by July
2010). Toyota’s Etios (expected launch by December 2010) will add to competition in this category.

‰ Three new launches in three months; two more on the anvil

Three global majors (General Motors, Volkswagen and Ford) have launched a model each in the compact car category
over the last three months. Nissan and Toyota too are looking to launch their small cars in India over the next six
months. For the first time, global majors are launching products at the right price points (in the affordable Rs300,000-
500,000 category) by increasing the localization content as well as tweaking engine configurations so as to fall in the
small car segment in order to avail of excise benefits. We see significant escalation in competitive intensity in the
segment.

‰ Ford Figo – a value-for-money proposition

• Ford launched Figo – its compact car offering in India – priced in the range of Rs360,000-460,000 (ex-showroom
Mumbai) – in both petrol and diesel versions
• Ideally geared for the Indian traffic, the 1.2-litre version offers mileage of 15.4 kmpl. The diesel variant would be
powered by the proven, class-leading 1.4-litre Duratorq diesel engine (Ford Fiesta engine) with outstanding fuel
efficiency of 18.4 kmpl

• A five-speed manual transmission is standard equipment on both engines

• After-sales service for the new Figo has also been enhanced. Ford India recently announced the opening of 28 new
dealerships in India, bringing the total number of Ford outlets to 164 facilities in 97 cities. Nearly 50 facilities feature
Quick Service, a new servicing process that is designed to quickly perform routine maintenance in less than 90
minutes
• As part of the initial pricing, all Figo models will be covered with Roadside Assistance for two years

Ramnath S Aniket Mhatre

[email protected] [email protected]
91-22-6622 2570 91-22-6622 2559

IDFC - SSKI Securities Ltd.

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“For Private Circulation only” and “Important disclosures appear at the back of this report”
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Unique features
• Ford Figo is quite spacious and can easily accommodate three people on the back seat (total of five in the car).
• The car has an indicator that indicates how many kms the car can run without further refueling
• The car has one of the largest boot spaces for a compact vehicle (284 ltrs) against Maruti Swift’s 232 ltrs and Hyundai
1-10’s 225ltrs. Further, the back seat is collapsible, resultant of which the boot space can further be increased
manifold.
• The diesel variant gets Ford Fiesta’s proven, class leading 1.4-litre Duratorq diesel engine (Ford Fiesta engine) with
outstanding fuel efficiency of 18.4kmpl
• The rear mirror adjustment knob at the driver’s end is capable of adjusting both the mirrors
• Comfortable driving experience
• Road clearance is adequate

Drawbacks
• Surprisingly, even the top-end variant (Titanium) does not have rear power windows
• The rear windows open only partially. While it is supposed to be for child safety, we feel it is too old fashioned and
an unnecessary restriction
• Steering adjustment facility not available
• The car design is very simple and not very appealing compared to Hyundai i-10, Maruti Swift, Fiat Grande Punto etc.

Production capacity
Ford Figo would be manufactured from its new Chennai facility, which has an annual capacity of 200,000 units. Ford has
invested USD500m for the new plant. The model will have ~85% localization content, which would help the company
keep prices low.

Our view
We believe Figo is a value-for-money product with two most important features for the Indian consumer; extremely
spacious interiors and a large boot space. These two features available at an attractive price are likely to entice the price
conscious Indian customer thereby leading to market share loss for Maruti Suzuki, Hyundai etc

‰ Volkswagen Polo – Brand premium

• Volkswagen launched its much-awaited compact car Polo in India – priced in the range of Rs434,000-670,000
• Polo is available in both petrol and diesel engine versions (diesel variant likely to be available from June 2010) having
a five-speed manual transmission gearbox
• The car offers a mileage of 17.2kmpl in ideal conditions.
• The car can cross the100kmph mark in 14.2 seconds and has a top speed of 182kmph

Unique features
• Polo is one of the biggest B-segment cars in India and among the most stylish cars in the compact category with sleek
exteriors and good-quality interiors
• Very low maintenance costs; maintenance required once every 15,000kms
• The front seats are comfortable and roomy
• Polo’s ride quality is unmatched by any other hatchback in the segment today
• Road clearance is adequate
• Boot space is also adequate

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Drawbacks
• With an adequate boot space, the car's designers seem to have somewhat compromised on leg space on the rear
bench. Though not uncomfortably low, it may feel cramped to taller people
Production capacity
Polo would be manufactured from Volkswagen’s unit in Chakan, which has a production capacity of 110,000units pa on
a single-shift basis (investment of Rs38bn). Resultant, localization content in the car would be ~50%. The Chakan facility
also manufactures Skoda Fabia currently. The company is targeting to sell ~30,000units of Polo in CY10.

Our view
Polo comes across as a top-quality German hatchback, competent in terms of dynamics, good-looking and well-
engineered. It is priced at a premium to Swift – primarily considering the strong brand image. Although still the market
leader in that category, we believe Swift is now an ageing product and customers may not mind paying a premium for a
superior global brand and a new look. Further, Indian customers, for the first time would be able to buy a German
quality product in the affordable price range (entry level Polo is priced at Rs434,000 – ex-showroom Mumbai).

‰ Chevrolet Beat – an attractive value-proposition

• Chevrolet Beat is loaded with a 1.2ltr – 1199cc 4cylinder petrol engine and is priced in the range of Rs390,000-510,000
(ex-showroom Mumbai)
• As per ARAI norms, Beat can achieve a mileage of 18.6kmpl on the highway.

Unique features
• Chevrolet Beat’s key attraction is its stylish design with the bold signature grille flanked by massive headlamps
• The dashboard is well-designed in terms of visual appeal and the quality of material used
• The rear door handles are located on the wings and is an interesting design change
• Ride quality is among the best in the category

Drawbacks
• Boot is small at 170 ltrs and the opening of the tailgate does not make loading luggage easy
• The dashboard is a bit high and the lack of seat adjustment for drivers could pose a problem for short drivers
• The partially blanked out rear window obscures visibility

Production capacity
General Motors manufactures both its small cars – Spark and Beat – from its facility in Talegaon which has an annual
production capacity of 140,000 units (expected to double next year)

Our view
Chevrolet Beat is a stylish car from a reputed brand available at an attractive price point. The model has been widely
accepted in the domestic market and enjoys a waiting period of ~2 months. However, the limited success of the Spark
and the perceived quality issues may act as a dampener to the scalability of the model.

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Comparative features (for all top end petrol variants)

Chevrolet Beat Hyundai i-10 Maruti Swift Ford Figo Volkswagen Polo
Price Rs lakh (ex-showrrom Mumbai) 4.44 4.78 5.23 4.64 5.99
Fuel options Petrol Petrol Petrol / Diesel Petrol / Diesel Petrol / Diesel
Engine Capacity 1199 1197 1197 1196 1198
Max power (PS@RPM) 80.5@6200 80@5200 85@6000 71@6250 75@5400
Warranty 3yrs 2yrs 2yrs 2yrs 2yrs
Performance
0- 100kmph in (sec) 14.9 14.8 13.8 16.4 14.2
Top speed kmph 161 146 156 145 182
Fuel efficiency (kmpl) 18.6 18.1 17.9 15.4 17.2
General data
LxWxH (mm) 3640x1595x1520 3563x1595x1550 3760x1690x1530 3795x1680x1427 3970x1682x1453
Wheelbase mm 2375 2380 2390 2489 2456
Kerb weight kg 965 860 1000 1090 1157
Boot space ltrs 170 225 232 284 220
Source: Dealers, AutocarIndia

‰ Nissan and Toyota to launch small cars over the next six months
Two other global majors are likely to launch their small car offerings in a span of six months. While Nissan Micra is
scheduled for launch by July 2010, Toyota’s Etios is expected to be launched by Dec2010.

Nissan Micra: Micra will come with a 1.2-litre, three-cylinder engine available in both petrol (1200 and 1300 CC variants)
and diesel version (1600cc option). Micra will be manufactured at Oragadam plant near Chennai which is a 50:50 JV
(between Nissan and Renault) set up at a total investment of Rs45bn with an initial capacity of 400,000 units.
Localization content is expected to be ~80% with target sales of about 200,000 units annually

Toyota Etios: This mass-market car is likely to be available across showrooms by December 2010 (bookings to start by
Diwali 2010). Etios would be manufactured in India from a new manufacturing facility in Bangalore (set up at an
investment of Rs32bn) and is expected to be competitively priced. The small car will be powered by a 1.2-litre petrol
engine so as to benefit from reduced excise duties. The company targets to sell 70,000 units in the first year of its launch.

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